Bev/Al Stocks Fell After CBrands Reports Beer's Operating Income Declined

Constellation Brands stock fell 8.37% to its lowest level in 10 month as higher costs for raw materials, packaging and logistics as well as brewery expansions hurt fiscal third quarter earnings.

Third quarter net sales were $3.437 billion, up 5% from the year earlier.  But operating income fell 11% to $747 million and the per-share net income rose only 2%.  Excluding Canopy, the net income turns into a $3.01 loss, a 12% decline.

Bev/al stocks reacted negatively to the earnings report.  Molson Coors fell 3.27%, Duckhorn Portfolio was down 2.8%, Brown-Forman declined 2.77%, Boston Beer was off 2.11% and Anheuser-Busch InBev showed a 1.65% drop.

CBrands said the Wine and Spirits Business "delivered strong relative performance across higher-end wine and craft spirits portions of the portfolio, outpacing corresponding segments of U.S. and wine and spirits categories in dollar sales growth in IRI channel.  

The beer business saw depletion growth of almost 6%, driven by the continued growth of Modelo Especial and strong momentum in the Modelo Chelada brands.  Modelo Chelada brands continued to be the  No.1  chelada in the U.S. beer market, posting over 40% depletion growth and held 60% market share of the entire chelada segment.

Corona Extra reported depletion growth of more than 1% and
remained theNo. 3 share gainer in the entire  U.S. beer category in
IRI channels.

The Wine and Spirits business reports shipments fell 14.8%, depletions fell 5.6%, net sales were down 4% and operating income slid 7%.  So, CBrands looked for good news where it could find it.

  • The Aspira portfolio of fine wine and craft spirits posted 9% depletion growth, driven by 7% depletion growth
    from  The Prisoner brand family and double-digit depletion
    growth from Mi Campo Tequila, High West Whiskey, and Casa
    Noble Tequila.
  • In IRI channels, CBrands' premium wine and craft spirits portfolios outperformed their corresponding segments in dollar sales  growth; premium wine portfolio also gained share in the
    entire U.S. wine category.

Looking ahead, CBrands said it expects 9-10% sales growth and operating income to grow 4-5% for beer in the fiscal year ending Feb. 28. It also expects its Wine and Spirits organic net sales to decline not more than 2%

Analysts at Morgan Stanley said overall depletion appear to be slowing and untracked channels slowed moe han expected.